Is my Company Eligible for R & D?

The basic requirements for R & D tax relief is that you must be a UK company which pays corporation tax. Even if you've made a loss, you could still be eligible to receive tax relief in the form of tax credits or you can simply carry the loss over to the following tax year.

The not-so basic requirements are that you must have invested into Research and Development. This is where things can become a bit hazy. What counts as R & D?

HMRC define R & D as an advancement in the knowledge or capability in a field of science or technology through the resolution of scientific or technological uncertainty.

This isn't a black and white definition, there are many borderline projects which can be difficult to define and it's important to consider all factors. These factors include project components such as innovation, uncertainty, costs and skills.

Innovation:

The project you're doing must, in some scientific or technological manner, be innovative. This does not necessarily mean that it's never been done before. Many companies develop new methods and processes that are considered R & D, but if they don't make this knowledge available, then other companies could claim it as R & D if they develop it independently.

Uncertainty:

If at no point during the project there is any uncertainty then it's likely not going to be R & D. In order for it to be eligible there must be some level of uncertainty, such as the ability to manufacture a certain component, or to deliver the required performance of a piece of software.

As with all innovative projects, sometimes it simply isn't possible to overcome the uncertainties. This however makes no difference, the project can still be classed as R & D.

Cost:

A good indicator is often the cost of the project. If you've only spent a few thousand on a project then it would seem that the task wasn't too difficult and thus the level of uncertainty/innovation is likely to have been minimal.

Skills:

In order to innovate, the staff/subcontractors involved in the project would usually have a high level of expertise. Any technical uncertainty that is overcome then has a high chance of being innovative. On the other hand, if uncertainty is rife throughout the project, but is carried out by trainee staff members, it is less likely to be innovative.

More Information

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Disclaimer

Please note, it is important to take professional advice before embarking on a claim for R+D or any tax relief. The information provided on this site is subject to change and should not be construed as advice.